Pakistan is moving to convert $1 billion (C$1.35 billion) of deposits from the United Arab Emirates into equity tied to the Fauji Foundation group. Deputy Prime Minister Ishaq Dar outlined the plan at a year‑end briefing in Islamabad, saying the shift would replace a short‑term liability with longer term investment.
The conversion would mark a change in how Pakistan manages bilateral support that has often arrived as central bank deposits. Officials signalled the aim is to ease near‑term repayment pressure while drawing strategic capital. The talks follow a recent visit by the UAE president to Pakistan.
Dar said the equity transfer should be completed by March 31, 2026, if negotiations stay on track. The conversion is designed to remove the deposit from Pakistan’s external debt statistics once the shares change hands.
“They will be acquiring some shares, and this liability will end,” he said at the briefing. Authorities expect the transaction to be sized at about $1 billion (C$1.35 billion). A separate $2 billion (C$2.70 billion) rollover is also under discussion.
Fauji Foundation role under discussion
Attention now turns to the structure. Local business press reported that a newly created investment vehicle could be used instead of large direct stake sales in listed subsidiaries. That approach would see cash from the UAE matched with selected Fauji holdings, subject to valuation and approvals.
The reporting also suggested core positions, such as fertiliser and energy, may not be heavily diluted if a vehicle is used. Final terms remain to be settled and may change as due diligence proceeds.
Fauji Foundation is a major industrial group in Pakistan, with interests spanning fertiliser, cement, food, power and financial services. Its companies play a role in domestic input supply and export earnings. Any change in ownership at the group or its affiliates would be closely watched by lenders and the local equity market. Transaction design will matter for governance and control. Valuation, foreign exchange treatment and regulatory approvals are key execution risks.
Rollover talks and timing
The conversion proposal runs alongside discussions to extend a separate $2 billion (C$2.70 billion) deposit due in January 2026. Islamabad has relied on repeated rollovers from the UAE, Saudi Arabia and China to stabilise reserves, while seeking to pivot toward investment that retires liabilities.
At the briefing, Dar added, “The shares are of the Fauji Foundation Group,” underscoring which assets are under consideration. Pakistan has previously indicated that about $12 billion of bilateral deposits were rolled over to meet International Monetary Fund programme conditions in recent years. The broader strategy seeks to replace short‑term funding with equity inflows that reduce refinancing risk.
Execution will depend on how the State Bank records the swap and how regulators classify any special‑purpose vehicle. Local reporting suggests the rupee equivalent could be created at the central bank and channelled into the new fund, leaving gross reserves unchanged but lifting reported foreign direct investment.
Settlement by March 31 would line up with the deposit’s maturity profile and Pakistan’s external payment calendar. The outcome will signal how far partners are willing to convert short‑term support into long‑term stakes.